Positive on ITC & ICICI Bank, says Deven Choksey

In an interview to CNBC-TV18, Deven Choksey, MD of KRChoksey Investment Managers Private Limited shared his readings and outlook on specific stocks and sectors.Below is the verbatim transcript of Deven Choksey’s interview to Latha Venkatesh, Sonia Shenoy & Anuj Singhal.Sonia: Now that the goods and services tax (GST) overhang is out of the way on ITC and still there is a lot of valuation headroom, do you expect to see a big upside here and what is your recommendation?A: Certainly, as you rightly mentioned about GST overhang, the clarity is now emerging. Probably, once they list out the items, which would get individually called in different tax rates; it would give further more clarity. But as I see it, I get the feeling that the tax part of clarity is far more fundamental for fast-moving consumer goods (FMCG) players like ITC and that is where the company should probably be in a much better position to accept this particular new tax regime. I would think that given the kind of portfolio of products that they have and given the kind of market share that they have started registering, particularly in the FMCG part of the activities, I would think that the company should remain on a solid ground. Maybe one will have to see how exactly the earnings pans out going forward, but remaining very positive about this particular company from investment perspective at least two years and above.Latha: Your take on Sun Pharmaceutical Industries?A: I think the valuations remain a bit of a concern and particularly that concern would remain till the time you have the growth coming back. Ranbaxy integration process is appearing to get over and that should result into the savings in the costs subsequently from the financial year 2017-2018 onwards. Now, if that is so then in such situations, you should be seeing 2017-2018, in which larger part of the profit also should start contributing from the Ranbaxy integration, which they are completing or in the process of completing. So, that is one thing which I would like to look at a little bit more positively in the entire middle of valuation side. Generally higher valuation is accepted when you see the growth in the business. The growth in the business is definitely there, but at the same time there are other issues which are basically resulting into some doubts at some stage, whereas the company is basically in much better position with the cash in the balance sheet. I would rather like to see how exactly they start generating higher profit from Ranbaxy, one and second, how they demonstrate the strategy to further grow the company through an inorganic approach. Once the valuation comes down to reasonable level, it becomes an opportunity to buy into the portfolio at lower levels.Anuj: ICICI Bank bottomed out, saw huge buying as well but off late we have again started to see a bit of selling ahead of numbers. Is this is a stock that you are confident buying at Rs 260 or would you avoid it?A: Yes, in corrections or fall, I would certainly like to buy this particular company, largely because of the overhang pertaining to the non-performing asset is now getting out of the way, gradually though, for most of the banks including ICICI Bank. So, obviously it calls for buying the stock at lower levels and probably stay invested in. The true value reflections of different other businesses would also start materialising as far as ICICI is concerned in their books and that is where the company should be relatively better placed. So, everything is good at lower price, so valuation is now suggesting that somewhere around Rs 240-250 is a good entry point once again to add into the portfolio.Sonia: Wanted your thoughts on Biocon, not too far away from its 52-week high of Rs 1,000. Is this is a stock that you would be bullish on?A: Yes, it offers a lot of clarity and visibility as far as their new product launches are concerned though it would stay at least two years away from where exactly they are, but the filings have started taking place. Therefore, the visibility on that front has definitely improved the company and its prospects. Valuation wise, it is an adequately fairly valued stock currently. So, unless you see some correction in the price, the new buying may not happen. Existing holdings that we have, we continue to hold.Latha: Your thoughts on pharmaceuticals?A: I would like to look at the companies individually for adding into the portfolio during this particular fall. I may play a little contra. Maybe, currently, the market fall is also due to many other reasons including some of the overhang concerns and it is this time when you get some of the opportunities in select companies. I would rather feel that the allocation of funds eventually would start moving into pharmaceuticals where they have got better visibility of earnings going forward. So, certainly a fall in the market probably is a welcome fall. Maybe in the corrective fall, you should try to look at individual companies to add into the portfolio.